The number of companies or countries at risk of having their credit ratings cut has been pushed to an all-time high by the coronavirus pandemic, S&P Global analysis shows.
A total of 1,287 of S&P’s ratings are now on a downgrade warning – either with ‘negative outlooks’ where a move might take two years, or on ‘CreditWatch with negative implications’ where the risk is almost immediate.
It tops 1,028 in the wake of the financial crisis in 2009 and comes despite nearly 700 downgrades already being affected by COVID-19 in recent months.
“Almost two-thirds of issuers face downgrade potential due to the unprecedented challenges posed by COVID-related containment measures,” S&P said in its analysis.
Media and leisure firms, automakers and transportation companies have the highest proportion of at-risk ratings, the data also showed.
Hotels and entertainment firms have the highest percentage of CreditWatch negatives as a share of total potential downgrades, with 74 per cent compared with 35 per cent for other companies in media and entertainment, 49 per cent in automotive, and 43 per cent in transportation.
A total of 17 countries have negative outlooks on their sovereign ratings, ranging from triple-A Australia to default-threatened Zambia, as do a third of all banks in emerging markets.
The number of potential “fallen angels” – companies or countries whose ratings could get downgraded to so-called ‘junk’ from ‘investment grade’ is also now at a record high.
There have been 24 such moves already, including major global names such as Ford Motor Company, Kraft Heinz Co., Renault SA, Delta Air Lines Inc., and Macy’s Inc., which have been stripped of their investment-grade stripes.
It has affected more than US$300-billion in debt, S&P estimates, while the 111 of potential fallen angels still at risk have another US$444-billion of bonds.
“We expect heavy credit erosion in coming months as issuers, especially those in the lower-rated spectrum come under heavy fire from poor earnings, continued difficulties in managing cost structures, and market volatility,” S&P said.
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